The New Ecology of Social Benefit

By Katherine Fulton and Andrew Blau

Excerpted fromLooking Out for the Future: An Orientation for Twenty-first Century Philanthropists

©2005 Monitor Company Group, LLP

We encourage readers to use and share the content of this document, with the understanding that it is the intellectual property of the Monitor Group, and that full attribution is required

www.futureofphilanthropy.org

Global Business Network and Monitor Institute, members of the Monitor Group

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Every eff ort to promote social benefi t today takes place in a new ecology—a con-

text deeply diff erent from that in which many of today’s institutions, assumptions,

and habits were formed. Th e pressures of this new ecology, and the need to re-

spond to it, will shape both how philanthropy is practiced for the next generation,

and what philanthropy is called upon to do.

You may already be familiar with how some of the shift s we describe in this sec-

tion are changing the fi elds you know best. What seems less obvious but no less

important is how these forces, each of them powerful on its own, are combining to

change the role, resources, and potential of philanthropy, imposing new pressures

on anyone committed to serious, strategic giving.

Th at’s where we want to start this discussion: with the eff ects of the new ecology

on how philanthropy can and will be practiced. Since philanthropy addresses

every aspect of human life, this brief guide does not attempt to look at the

changing context for everything that philanthropists give to, such as health or

education, although we believe deeply that anyone who wants to work eff ec-

tively should do so.

Th e concentric circles pictured on the following page outline the shift ing context

in which the practice of philanthropy is framed. Every actor sits in the middle of

changes taking place in the world outside of philanthropy, and in the midst of

irreversible changes within philanthropy itself.

THE WORLD AROUND PHILANTHROPY. Th e fi rst terrain that needs to be

mapped is the landscape beyond philanthropy—the many interacting trends in

“The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.”

- Peter Drucker

The New Ecology of Social Benefit

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the world that shape philanthropy and its role. We want to draw your attention

to three of the most critical forces: the complex evolution of power that is redis-

tributing resources and infl uence (privatization); the explosion of ways to connect

people at any distance for almost any reason, which leads to new threats and op-

portunities (connection); and the speed with which knowledge is created, shared,

and drives change (acceleration).

THE WORLD OF PHILANTHROPY. Just as the world around philanthropy is

changing, so philanthropy is too. Th e shift of resources into private hands has

generated new wealth for philanthropy and has brought many additional players

and perspectives to the creation of social benefi t (multiplication and diversifi ca-

tion). Th is growth has increased the appetite of outsiders—the press, the public,

the politicians—to look into the once-quiet, oft en insular world of philanthropy,

while changes in media and communications have made it far easier to do so and

to publicize the results (observation). At the same time, givers also enjoy more and

better ways to learn from the past and each other. Th e accumulation of experience

practicing philanthropy, a new emphasis on studying and sharing that experience,

and new means to do so in networks of all kinds have boosted the capacity to make

informed decisions (refl ection).

Working from the outside in, let’s take a look at these seven forces, which change the

options available to every giver, whether or not he or she chooses to act on them.

You and Your Giving

Philanthropy

The World

MultiplicationDiversification

ObservationReflection

PrivatizationConnectionAcceleration

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Privatization

Private power, both to create social problems and to solve them, has increased

steadily over the last generation. Th is shift of power away from governments or

other public institutions and toward businesses, nongovernmental organiza-

tions (NGOs), and individuals cuts both ways. Privatization means that criminals

now possess the capacity to build global black markets to trade weapons, drugs,

and humans, and terrorists can use modern weapons and fi nancial and commu-

nications networks to wage war against far more powerful groups or nations. It

means that some corporations have grown to a size

and reach that exceeds that of many national gov-

ernments. But privatization also means that NGOs,

including independent foundations, can work along-

side governments and across boundaries of all kinds

on behalf of the causes they believe in. Wealthy

individuals, whose numbers have risen dramati-

cally along with their freedom to choose how to use

that wealth, can lead international eff orts that were

formerly the province of governments. Even indi-

viduals of average means can contribute to public

works and well-being outside of traditional gov-

ernment channels. Although the importance and

power of governments has not necessarily dimin-

ished, the stage on which they work—and the

actors with whom they must interact—has been

transformed. Th e same is true for philanthropy.

PRIVATIZATION

• Of the world’s 100 largest revenue producers in 2003, only 24

were countries/governments (measured by budget revenue). The

other 76 were corporations (measured by annual revenue).

• Wal-Mart was the sixth largest revenue-producing entity in the

world, behind only the governments of the U.S., Germany, the U.K.,

Italy, and Japan.

• The combined net worth of the Forbes “400 Richest People in

America” was $1 trillion. Bill Gates’s net worth in 2003, $46 billion,

was larger than the GDP of many countries, including Morocco,

Vietnam, and Kuwait.

• In 1970, 70 percent of the capital flows to the developing world were

from the government sector and 30 percent were from the private

sector. In 2003, only 20 percent were from the government sector

and 80 percent were from the private sector.

• In 2003, more money flowed into Latin America through remit-

tances (money sent home by private individuals working abroad)

than the combined flows of all foreign direct investment and official

development assistance to the region.

Sources: GBN original research; Forbes; AccountAbility and Business for Social Responsibility, Business and Economic Development: The Impact of Corporate Responsibility Standards and Practices; Multilateral Investment Fund, Remittances as a Development Tool

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CONNECTION

Connection

We take for granted so many technologies of connection that we sometimes forget

how profoundly they have changed our world. Communications tools, including

the Internet, the telephone network, cellular phones, and text messaging services

allow us to be in constant contact with friends, colleagues, customers, partners,

adversaries, and even strangers around the

world. Th e World Wide Web, that ever-expand-

ing bazaar of information and opinion, supplies

a steady stream of ideas and supports a growing

number of exchanges. Satellites and cables sustain

a worldwide media system that can inform, rally,

surprise, distract, and entertain us. Of course, the

advances in communication and transportation

that promote global connection and commerce

also allow problems such as disease, environ-

mental threat, or political instability to proliferate

more widely and more quickly. As a result, the

problems that philanthropists are called upon to

address increasingly span borders and domains.

Th e good news is that the same forces that allow

problems to spread also enable responses to be

coordinated and solutions to be shared.

Problem and Promise

The SARS epidemic of 2003 is a powerful example of the dangers

of a highly interconnected society, but also of the promise that con-

nection can bring.

SARS, a previously unknown and highly infectious respiratory dis-

ease, emerged from China in February of 2003. In the course of a

few short months the disease spread across 32 countries, infecting

nearly 8,000 people and killing more than 700.

Within a month after the disease had spread from China, the World

Health Organization facilitated 11 research labs around the world in

a massive collaborative effort to find and analyze the cause of SARS.

The labs each pursued what they believed to be promising lines of

investigation, but were able to coordinate what they were learning

and share data and information in real time, conferencing daily over

the phone and on the Web.

Just a week after the project began, the team of labs had isolated a

candidate virus. Within a month, the labs had conclusively proved

that the virus was the cause of SARS, sequenced the virus, and

developed several diagnostic tests. Four months after the first out-

break outside of China, the epidemic was successfully contained,

due in large part to this unprecedented international collaboration

and cooperation.

Source: James Surowiecki, The Wisdom of Crowds

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ACCELERATION

Acceleration

One of the ways that connection has changed our world is so important that it

is worth calling out on its own. By increasing the density, speed, and scope of

connection, our society has accelerated the rate at which information is commu-

nicated, the rate at which it can be incorporated into other processes, and the

number of people who can use that information to create new ideas, make new

discoveries, and synthesize new inventions. Not only is the creation and diff usion

of knowledge accelerating, but so is everything that depends on it: science, tech-

nology, commerce, fads, culture, and eff orts to create social benefi t. Even the pace

of acceleration is, itself, accelerating. Th is is not just a matter of change; there have

been periods of rapid and profound change in the past, including the era a cen-

tury ago in which modern organized philanthropy was established. What is new is

how the process feeds on itself as information and knowledge become accelerants

in the creation of more information and knowl-

edge. One eff ect is that there is a new pressure on

public and private institutions at all levels—local,

regional, national, and global—to respond more

rapidly to shift ing external circumstances.

• The amount of new information (recorded on print,

film, magnetic, and optical media) in the world has

essentially doubled in the last three years.

• The amount of stored information produced in

2002 alone is equivalent to 37,000 new Library of

Congress book collections.

• It would take almost 30 feet of books to store the

amount of recorded information produced per

person in the world each year.

• Google’s index of webpages has grown from 1 billion

in 2000, to 4.28 billion in January 2004, to more

than 8 billion URLs just a year later.

Sources: U.C. Berkeley School of Information Management and Systems, How Much Information 2003; Google corporate website

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MULTIPLICATION

Multiplication

Everything associated with the domain of social benefi t has grown signifi cantly in

the last 25 years, making it both a more active and more crowded environment.

For example, one result of the privatization mentioned previously is that more

wealth has accumulated in private hands in recent years. It’s not just that the rich

are getting richer: there are also more of them. Th at means there are more people

able to give signifi cantly, who in turn have attracted a burgeoning industry to serve

their philanthropic interests. In the last 15 years, the landscape has changed sig-

nifi cantly simply by growing quickly: there are more donors, more donor-advised

funds, more foundations, more

giving circles, more businesses

vying to assist the wealthy, and more

nonprofi t organizations competing

for funds. At the current pace of

growth, 11 new foundations and

119 nonprofi ts are created every

day in the U.S. Consequently, the

environment in which any individ-

ual actor chooses issues, formulates

strategies, and makes contributions

is increasingly crowded with com-

petitors, potential collaborators,

and even people or organizations

working at cross-purposes.

Source: Foundation Center, Forbes

Growth in the Number of U.S. Billionaires and U.S. Foundations

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

350

300

250

200

150

100

50

01982 1985 1988 1991 1994 1997 2000 2003

U.S. Billionaires

U.S. Foundations

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DIVERSIFICATION

Diversification

Not only is philanthropy growing in size, it is diversifying by almost every mea-

sure. Today’s wealthy include growing numbers of women, Latinos, blacks, East

Asians, and South Asians who bring to philanthropy their respective cultural tra-

ditions as well as their assets. Younger donors who made their money in emerging

industries like information technology or biotechnology bring new assumptions

about how to get things done and how active they want to be as living donors.

Increasing entrepreneurialism in China, India, and Russia and broader economic

growth around the world are producing more multi-millionaires and even billion-

aires in other countries; as they develop the philanthropy that follows from their

wealth, they are likely to express diff erent priorities and practices. At the same

time, philanthropy is no longer only the province of the very rich. Advances in

fundraising techniques and growing participation in nonprofi ts by the U.S. middle

class means that giving, from the

most local to the global, engages

a wide range of Americans. And

the practice of social benefi t is

also diversifying beyond philan-

thropies and charities to include

an increasing number of hybrid

organizations: for-profi t “social

ventures” and entrepreneurial

nonprofi ts that are expanding the

traditional categories and increas-

ing the types and totals of those

generating social benefi t.

North America2,500,000

Latin America300,000

Europe2,600,000

Middle East200,000

Africa100,000

Asia-Pacific2,000,000

Number of Millionaires Around the World

Sources: Capgemini and Merrill Lynch, 2004 World Wealth Report

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OBSERVATION

Observation

Th e enormous growth in both the number of people engaged in the social sector

and the amount of money coursing through it is suffi cient to attract attention. Add

in the increasing availability of information about almost every actor in the sector

and the means to communicate it instantaneously and mounting scrutiny seems

inevitable. As Th e New York Times wrote in a January 2004 headline, the public

is now “asking do-gooders to prove they do good.” Both givers and grantees are

being held to rising standards of accountability and transparency, and the

information to pass judgment is widely available: on the Web, in the mainstream

media, and in the growing number of trade press publications dedicated to

nonprofi ts and philanthropy.

2,000

1,500

1,000

500

01970 1975 1980 1985 1990 1995 2000 2003

Number of Articles in All U.S. Newspapers and Wires with Philanthropy in the Headline or the Lead Paragraph

Source: GBN original research using Nexis.com

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REFLECTION

Reflection

In the last 25 years, people in the social sector have benefi ted from enormous ad-

vances in their ability to refl ect on their own work and the work of others in the

fi eld. University programs devoted to nonprofi t leadership and philanthropy have

sprung up across the country; newspapers and journals devoted to social-sector

work have been launched; and the number of infrastructure organizations that

support philanthropic initiatives, communication, and shared learning has grown

rapidly. Th ere is now a history to study and many more institutions and vehicles

through which one can learn it. What began as a relatively small fi eld with little

information available is rapidly becoming a mature industry.

Number of PHILANTHROPIC

INFRASTRUCTURE GROUPS

(including regional associations of

grantmakers, affinity

groups, grantmaking

support organizations,

and universities).

Growth:

291%

175

150

125

100

75

50

25

01980 2002

172

44

60

50

40

30

20

10

01980 2003

49

8

Number of ACADEMIC, NONPROFIT,

and PRIVATE RESEARCH ORGANIZA-

TIONS focused on philanthropy.

Growth:

513%

Philanthropic Growth

Sources: Council on Foundations; GBN original research

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What Does it Mean to You?Philanthropy now takes place in a world shaped by all of the elements we have described, and despite the great freedom that philanthro-pists have, they will be affected by all of it, not just the parts they like the most.

But the new ecology won’t affect every giver or every issue the same way. An exercise you can do, by yourself or with a group, is to take seven pieces of paper or flipchart pages, and on each sheet brainstorm about one of the seven themes: privatization, connection, acceleration, mul-tiplication, diversification, observation, and reflection. Think through what each theme means or how it either challenges or supports your assumptions in the arena you care about the most (an issue, a com-munity, or even a single institution). How has the role and potential of philanthropy shifted in your area of interest? What new resources are potentially available now that were not a generation ago? What are the new challenges for philanthropists who want to make a difference?

Below, we take this exercise a step further by summarizing the mean-ing of the themes, especially as they begin to combine. Beside each, we illustrate the kinds of questions you might want to ask as you make sense of the themes for yourself.

Theme of the new ecology & implications for philanthropy How will this affect you?

PRIVATIZATION

There are new responsibilities in privatization. The relative growth of private power—in citizen orga-nizations and corporations—means that it is difficult to imagine progress without bolder and more creative leadership from private sources. Responsible profes-sional philanthropic leaders can lead outside their in-stitutions, facilitating efforts to convene various actors and to advocate for change. Individuals, too, will need to ask what new responsibilities they may have, given their resources.

In considering the issue you are interested in, what role did the government (or governments) play 20 years ago in addressing it or being responsible for its solution? Is it the same role as today? Are there more, the same number, or fewer private organizations (businesses and nonprofits) work-ing on this issue compared to 20 years ago? What roles do you expect they will have in the years ahead?

Do you assume that government is part of your “exit strategy”? Is that a safe assumption? What is your plan if it isn’t?

Who are the other private sector actors—business or nonprofit—who could play a positive, long-term role in the issue or area you care about? Which are best positioned to help galvanize government action where needed?

The New Ecology

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Theme of the new ecology & implications for philanthropy How will this affect you?

REFLECTION/CONNECTION

There is new opportunity in reflection and connec-tion. Every actor in the world of philanthropy has two new opportunities in the ecology we described: the abil-ity to reflect on nearly a century’s worth of philanthropic practice (changing daily) and the ability to connect to a growing array of actors. That’s why both formal and infor-mal networks are growing so rapidly in philanthropy; they are the mechanism for connecting ideas and people. In-deed, networks may turn out to be as central to organizing this century’s philanthropy as foundations were to organiz-ing philanthropy in the last century.

What have others done on the issue or in the area you care about? What worked or didn’t work, and why? Who has the most knowledge about your issue? Nonprofits, corporations, multilaterals, international NGOs, academics, or other funders? How would you connect to those that have the most or best knowledge?

What groups exist for funders interested in your issue? Can you join them? If not, can you initiate your own group?

Are there groups of funders who are creating strategies together or funding together on your issue? Can you join them? If there is not a group, could you initiate one?

MULTIPLICATION/DIVERSIFICATION

There are new resources in multiplication anddiversification. More actors and more different kinds of actors could simply add to the fragmentation of effort and uncoordinated duplication in the sector. When com-bined with connection and reflection, however, “more” and “different” become strengths. They increase the pool of ideas, resources, and allies for anyone seeking to address an issue or support a cause. Rather than see these two forces as simply increasing the competition for atten-tion, visibility, or impact, consider them as sources of new strength and energy.

Who else is working on the issues you care about? How does their work relate to and overlap with yours? Can you pool resources or strategize together to increase the scale or breadth of your joint interventions?

Who are your new allies, and how can you identify them? If you are funding from within an institution, how can you connect with the energy and resources among individual donors? If you are an individual, how can you ally yourself with institutional donors? If you are giving through a donor-advised fund, can you connect to, coordinate with, and share ideas with other donors?

OBSERVATION/ACCELERATION

There are new challenges in observation and acceleration. Every actor in the world of philanthropy faces at least two challenges that those in previous gen-erations didn’t. First, every actor now has to assume they will be scrutinized in their actions, perhaps even asked to justify their programs or practices, and called to account for their results. One can no longer assume a safe and quiet haven where people are given the benefit of the doubt be-cause they are doing charitable work. Second, every actor has to cope with the accelerated pace of knowledge and action, where external events outpace or even disrupt phi-lanthropy’s traditional decision-making cycles.

What do you keep private or hidden about your giving, and why? Even if you wish to be private or anonymous, how can you share your work quickly with others?

Is there anything about your strategy or activities that you wouldn’t want to see in the news?

Who or what dictates the pace of your giving? Internal needs or external needs? What could you do faster?